D.C. AGRAWAL, M.: ORDER Asst yr. : 2001-02 In this case, assessee has raised following grounds : "1. learned CIT(A) erred in rejecting claim for deduction of trading loss arising in respect of export business inter alia on following grounds : (a) holding that appellant had not raised any additional grounds of appeal on issue of allowability of trading loss; (b) holding that appellant had purchased goods outside India; 2 . learned CIT(A) erred in confirming disallowance of claim of deduction under s. 80HHC of Rs. 17,06,97,458 and while doing so he amongst others erred in : (a) not adjudicating on issue of determining direct and indirect expenses attributable to export of goods. (b) Not adjudicating upon other issues arising in connection with basis adopted by AO while denying claim of deduction under s. 80HHC. 3. learned CIT(A) erred in rejecting claim for exclusion from total income of Rs. 4,73,02,238 being amount of interest erroneously credited by appellant under mistaken view of entitlement on outstanding export proceeds due from Freeway Suppliers Ltd. 4. learned CIT(A) erred in rejecting claim for exclusion from total income of Rs. 88,33,956 being amount of gain arising out of foreign exchange fluctuation credited by appellant on outstanding export proceeds due from Freeway Suppliers Ltd. 5. learned CIT(A) erred in confirming interest levied under ss. 234A, 234B and 234C." 2. facts of case are that assessee is exporter engaged in business of manufacturing of cement based exterior paints and also in exporting goods after purchasing them from Singapore. During year under consideration, assessee sold goods worth Rs. 56.86 crores. One Dubai party to whom exports were made became debtor to assessee for sum of US$ 2,90,02,561. During year assessee realized amount of US$ 8,69,959, which pertained to earlier assessment year. balance amount of US$ 2,81,32,602 remained un realized. assessee did not receive amount till date of assessment order. assessee claimed deduction of Rs. 17,06,97,458 under s. 80HHC, which included deduction on unrealised export sale proceeds. Thus, two issues emerge from these transactions. One is whether assessee i s entitled to deduction under s. 80HHC and second whether non-recovery of sale proceeds from Dubai party can be allowed as business loss or as bad debt. Deduction under s. 80HHC 3. Before AO, it was claimed that goods were purchased from three parties as under : (1) Sahara Impex Ltd. Rs. 23,49,68,580 (2) Viplav Trading Ltd. Rs. 32,97,85,353 (3) W. H. Brady Ltd. Rs. 12 ,10,42,500 (4) Killick Nixon Ltd. Rs. 27,00,00,000 Total Rs. 95,57,96,353 4. These goods were brought into custom bonded warehouse from where they were re-exported to Dubai. According to assessee, transfer of documents can be affected by mere delivery and it will amount to sale by delivery of documents. As there was transfer of GR form by endorsement in favour of buyer, it amounted to sale of goods as passing of property in goods from assessee to Dubai buyer i.e. M/s Freeway Suppliers Ltd. took place through documents. AO did not accept contention of assessee and held that goods, which were in customs bonded warehouse, cannot be called imported unless goods clear customs boarder. Since goods have not come to India, it cannot be said that they are exported out of India. Once there is no export there is no question of export deduction. In addition, assessee did not receive foreign exchange against said sales. Thus, AO disallowed claim on two grounds : "(i) sale proceeds of export were not received in convertible foreign exchange as nothing is realized; no extension of time for money realization has been sought; (ii) There is no export of goods out of India. goods were imported from Singapore, they were lying in bonded warehouse. They did not cross Indian border as no custom duty was paid and thereafter goods were dispatched to M/s Freeway Suppliers, Dubai." 5. AO has dealt with issue in paras 9 to 15 of his order as under : "9. Unrealised Exports : During year assessee has only realized amount of US $8,69,959 of earlier relevant assessment year and not pertaining to this year and balance amount of US $2,81,32,602 remains unrealized. assessee has not received amounts till date (i.e. date of passing assessment order). assessee claims to have filed case in High Court of Justice, Commercial Court, London against Freeway Suppliers Ltd., London. extension which assessee got from various dealer is as under : Name of S.No. Amount Extension Bank State Bank of Hyderabad, C- Expired 1. 15, Mittal US$4,51,000 Long Back Tower, Nariman Point, Mumbai Abu Dhabi Commercial 25-3- 2. US$1,28,96,100 2. US$1,28,96,100 Bank, 751, 2004 Veer Nariman Road, Mumbai Allahabad Bank, Industrial US$1,40,58,434 Expired 3 Finance (including earlier Long Back Branch, years) Mumbai-20. Total US$2,82,06,034 10. From above, it can be seen that assessee company does not have extension for money realization and although RBI has granted powers to authorized dealer to grant extension, above banks have practically no role to play in whole scenario as assessee has not opened any L/Cs with them for exports. They are merely given bills to be collected by assessee and banks per sedo not have any stakes in these transaction. 11. In view of unrealized exports proceeds as per provisions of sub-s 2(a) o f s. 80HHC, same is not treated as export turnover of assessee for calculation of deduction under s. 80HHC. 12 . Further, export of goods have taken place not from India. goods were imported from Singapore and were lying in Bonded warehouse and they have not crossed Indian border as no custom duty was paid. goods were exported from bonded warehouse back to Freeway Supplies Ltd., office at Fuijarh, Dubai. 13. provisions of s. 80 HHC are as under : 80HHC.(1) Where assessee, being Indian Company or person (other than company) resident in India, is engaged in business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to provisions of this section, be allowed, in computing total income of assessee, (a deduction to extent of profits, referred to in sub-s. (1B),) derived by assessee from export of such goods or merchandise : Explanation-For purpose of this section ((aa) "Export out of India" shall not include any transaction by way of sale or otherwise, in shop, emporium or any other establishment situate in India, not involving clearance of any customs station as defined in Customs Act, 1962 (52 of 1962);) 14. So technically it cannot be called as export out of India, as goods never came into India, so assessee is not in any way eligible for deduction under s. 80HHC to above query assessee replied as under vide letter dt. 18th March, 2004 in para 2. Proof of goods received in India; (1) In 1967 proclamation by President of India extended territorial waters up to 12 nautical miles. According to Indian Territorial Waters... Etc. Act, territorial water is considered as territory of Union of India i.e. Central Government. We purchased materials through parties by endorsement as per para 6.4C of Exchange Control Manual. goods were lying at Customs Bonded Warehouse, from where it has been re exported to M/s Freeway Suppliers Limited. (2) It has been held in Chhaganlal Sevchand vs. CIT (1966) 62 ITR 133 (Bom) transfer of documents can be effected by mere delivery without any endorsement on it. (3) Even bank endorsement is also legal endorsement (Bills of Landing in International Law and practice by Dr. Justuce T. Kochu Thommen, Page 29). There can be sale by endorsement on delivery order (Kollasree vs. State 13 STC 522 (SC)). (4) Thus it can be seen that transfer of GR from with endorsement in favour of buyer are amount to sale of goods and assign of property in goods from seller to buyer (Milkhiram vs. State of Bombay (1963) 14 STC 18 (Bom)). (5) In IT Act, 1961 has given following negative definition of "export out of India" at Expln. (aa) below to s. 8HHC(4B), it states : (aa) "export out of India" shall not include any transaction by way of sale or otherwise, in shop, emporium or any other establishment situate in India, not involving clearance at any customs station as denied in Customs Act, 1962 (52 of 1962). Further s. 2(b) of Customs Act, 1962 defines "Customs Stations" means. . . , customs airport or ... we have given only relevant portion. (6) It may be seen that above definition is not applicable in our case, as it is only applicable if sale taking place in shop, emporium or like establishment where clearance of custom Airport is not necessary like duty free shops etc. (7) Bonded Warehouse is area of custom stations. When goods are lying in Bonded Warehouse, they are under effective control of customs authorities and they cannot be removed without payment of duty and without their approval. (8) In IT Act, 1961, "Crossing Customs Frontiers of India" has not been used. "Crossing Customs Frontiers of India" means crossing limits of area of customs station in which imported goods or exported goods are ordinarily kept before clearance by customs authorities. (9) In our case goods were exported after clearance from customs Department. Therefore, export of goods should be allowed. 15. assessee s submissions are considered as under : goods which are in bonded warehouse cannot be called imported unless goods clear customs border, thus as goods have not come in India cannot be exported out from India. goods were to imported by various parties and they were endorsed in favour of assessee, so in view of above facts it cannot be called as export out of India and therefore, cannot be stated to be eligible exports under s. 80HHC of IT Act, 1961." 6. Before CIT(A), it was claimed that due to financial crises, Dubai party has not been able to make payment even during extended period. assessee company has obtained necessary permission from Reserve Bank of India for delayed realization of sale proceeds. UK collaborator who had assisted assessee in securing export of goods has informed assessee that there is no chance of any recovery. CIT(A) considered submissions of assessee, and rejected claim for deduction under s. 80HHC as under : "2.41 have carefully considered facts of case. As per arguments of learned Authorised Representative of appellant, no profits have been earned by appellant as result of said export of goods to M/s Freeway Supplies Ltd., London. On contrary, appellant has allegedly not be able to realize sale proceeds of exports itself, let alone, earning and bringing into India any income in convertible foreign exchange. Deduction under s. 80HHC of IT Act, 1961 is to be allowed only in respect of profits earned in respect of export profits where sale proceeds of exported goods or merchandise are brought into India in convertible foreign exchange within period of six months from end of relevant previous year or within such extended time as competent authority may allow in this behalf. In case of appellant, such sale proceeds have not been received by Company even till date of passing of this appellate order. In view of these written submissions and oral arguments of learned Authorised Representative of appellant, there is no case for appellant to claim any deduction under s. 80HHC of IT Act, 1961 as no profits have been earned by appellant from its export activity and no sale proceeds of exported goods have been brought into India in any form. Hence, I uphold action of AO in denying deduction under s. 80 HHC to appellant." 7. main thrust of CIT(A) is that assessee has not been able to realize sale proceeds in convertible foreign exchange even after extended period. 8. Before us, learned counsel for assessee submitted that it is not necessary that convertible foreign exchange should have been realized in same year. assessee has obtained necessary permission from RBI, for extension of time period for receipt of foreign exchange. assessee had imported goods from Singapore, kept in Bonded warehouse under customs supervision. They were exported out from there to Dubai. assessee had in fact received part of sale proceeds in convertible foreign exchange during year. Since goods had entered into India and were exported, assessee is entitled for deduction under s. 80HHC on that portion of convertible foreign exchange received by it during year. 9 . On other hand learned Departmental Representative heavily relied on order of learned CIT(A). According to him twin conditions for allowability of deduction under s. 80HHC has not been satisfied. Neither there is any export nor there is any receipt of foreign exchange. No deduction under s. 80HHC can be allowed because assessee has not exported anything out of India. It brought goods from Singapore into custom bonded warehouse and exported same out of that warehouse. Since there was no custom clearance while import, goods never came to India. Hence it cannot be said that they were exported out of India. bonded warehouse are meant for avoiding payment of custom duties while importing and to facilitate importer to export same goods without passing through formalities of payment of custom duty and then export same after custom clearance. record kept by custom authorities at bonded warehouse is to ensure that what is brought to warehouse is exported out and nothing is brought into India without paying custom duties. Since legally nothing came to India it could not be said that assessee has exported goods or merchandise out of India. question of considering within meaning of Expln. (aa) to s. 80HHC. assessee received any convertible foreign exchange during year would arise for considering subsequently. 10. We have considered rival submissions and material on record. undisputed facts are that goods imported from Singapore were kept in bonded warehouse and sold out of India to Dubai. question is whether it is "export out of India". There are two legal aspects in this. One is that it should be transaction by way of sale or otherwise in shop/emporium/an establishment situated in India and other is customs clearance as defined in Customs Act. definition given in Explanation (aa) is rather negative. If transactions do not satisfy conditions then, it shall not be regarded as export out of India. Conversely, for export out of India, it is necessary to have custom clearance at any custom station. custom station is defined in s. 2(13) of Custom Act. It means any custom port or custom airport or land custom station. Secs. 57 and 69 of Custom Act reads as under : "57. Appointing of public warehouses. : At any warehousing station Assistant Collector of Customs may appoint public warehouses wherein dutiable goods may be deposited without payment of duty. 69. Clearance of warehoused goods for exportation. : (1) Any warehoused goods may be exported to place outside India without payment of import duty if : (a) shipping bill or bill of export has been presented in respect of such goods in prescribed form; (b) export duty, penalties, rent, interest and other charges payable in respect of such goods have been paid; and (c) order for clearance of such goods for exportation has been made by proper officer. (2) Notwithstanding anything contained in sub-s. (1), if Central Government is of opinion that warehoused goods of any specified description are likely to be smuggled back into India, it may, by notification in Official Gazette, direct that such goods shall not be exported to any place outside India without payment of duty or may be allowed to be so exported subject to such restrictions and conditions as may be specified in notification." 11. From comprehensive reading of above, it is clear that clearance is required even while removing goods from bonded warehouse. This clearance is given on payment of custom duty. Once customs clearance is obtained while taking out goods from bonded warehouse, conditions laid down in Expln. aa are satisfied. Therefore, any export made from bonded warehouse after getting clearance as per s. 69 of Customs Act would be export out of India entitled for deduction under s. 80HHC. To this extent conditions as laid down in section 80HHC about custom clearance is satisfied. view taken by lower authorities in this regard are not upheld, that there is no custom clearance. However, assessee has not furnished any evidence at any stage s o as to show that it has received any convertible foreign exchange for alleged export out of India during year or that it had sought permission for extension of time for delayed receipt of convertible foreign exchange, though such claim is made. In D.B. Exports (India) vs. CIT (1997) 140 CTR (P&H) 502 : (1998) 231 ITR 836 (P&H), rejection of claim of deduction under s. 80HHC was justified on ground that in spite of repeated extension given by CIT to bring foreign exchange in India, assessee was not able to bring sale proceeds in foreign exchange in India. Hence we are unable to uphold claim of assessee that it is entitled for deduction under s. 80HHC. This ground of assessee is rejected. 1 2 . Before parting away with this issue, we may like to observe that AO would be free to examine and assessee would be at liberty to adduce evidence about nature of transaction, which has given rise to these debts. In present appeals, we have noted that assessee was not able to produce any evidence as to whether any LC was obtained for alleged export. No evidence as to import of material for keeping in warehouse and their removal from warehouse after alleged customs clearance was produced. There was no evidence as to whether any export duty was paid when goods were taken out from warehouse. transaction apparently does not appear to be convincing but these issues were examined by AO or by CIT(A). We have gone on presumption that certain goods were imported, kept in bonded warehouse and then exported to Dubai party. There was no evidence as to whether it had actually happened. Therefore, we make clear that at time of when question of allowing debt not recoverable from Dubai party is examined, two parties will be at liberty to adduce evidence for deciding that issue de novo. Trading loss 13. assessee has claimed non-recovery of export sale proceeds as trading loss. fact on record is that assessee has not been able to realize any convertible foreign exchange out of sale proceeds. assessee treated M/s Freeway Suppliers as its debtor in its books of account. No trading loss has been debited to P&L a/c. According to AO what assessee has not realized is only trading debt, which is not written off so far. Before CIT(A), assessee claimed that entire amount of exported goods should be treated as trading loss in view of fact that assessee has not been able to realise sale proceeds of goods exported by it. CIT(A) considered submissions of assessee, and rejected claim, as under (paras 2.5 to 2.6 of CIT(A) order) : "2.5 This brings me to next stage of considering appellant s alternate claim for allowing trading loss. It is undisputed fact, admitted by appellant itself, that appellant has not claimed any trading loss either in return of income of before AO during assessment proceedings by filing revised return. Even in present appeal filed on 23rd April, 2004, appellant has not raised any ground of appeal pertaining to its claim for any trading loss. It is also undisputed fact that appellant has not filed any Addl. ground of appeal till date of present appellate order, pertaining to alleged trading loss suffered by it. Under these circumstances, it is legally not possible for me to entertain appellant s claim, for allowing any deduction on account of trading loss allegedly suffered by it. All that facts of case, as projected by learned Authorised Representative of appellant and as stated above, indicate regarding export activity of appellant, is that appellant had purchased certain goods outside India and allegedly exported them from bonded warehouse without paying any customs duty. In process, appellant has earned profit of Rs. 25,76,35,378 (sale value of Rs. 12 1,34,31,811 less purchase value of Rs. 95,57,96,433 as per submission of Authorised Representative) which has been duly recorded in appellant s books of account. Moreover, appellant has treated M/s Freeway Suppliers Ltd., London as its debtor in its books of account and audited Balance Sheet filed along with return of income. Under these circumstances, appellant cannot claim any trading loss as no such loss has been debited to P&L a/c. Moreover, trading loss cannot be put at par with bad debt. appellant had supplied goods to M/s Freeway Suppliers Ltd. in past also and received payments even in previous year relevant to assessment year under appeal, in respect of goods supplied to this party in past. Trading loss may occur due to unforeseen reasons in process of carrying on trading activity such as fire, flood, war or sinking of ships carrying goods but it cannot be considered to have taken place where debtors are not recovered. If appellant is not able to recover anything from its debtor, proper course o f action is to claim deduction on account of bad debt after satisfying conditions prescribed in s. 36(2) of IT Act, 1961. I do not agree with learned Authorised Representative of appellant that deduction on account of trading loss can be made at appellate stage without first debiting P&L a/c and claiming such deduction in return of income or during assessment proceedings. 2.6 In view of these facts, AO s action of disallowing appellant s claim for deduction under s. 80HHC is upheld and appellant s alternate claim for allowing deduction on account of trading loss is dismissed. In result, this ground of appeal stands dismissed." 14. Before us, learned counsel for assessee submitted that deduction under ss. 36(2)/36(1)(vii) is allowable in respect of financial debts whereas trading debts should be considered as trading loss. This loss is equal to loss in stock-in-trade and therefore allowable as such. For this proposition, he relied on decision in Motamal Jethumal vs. CIT (1947) 15 ITR 155 (Pat), Pohoomal Bros. vs. CIT (1958) 34 ITR 64 (Bom), S.N.A.S.A. Annamalai Chettiar vs. CIT (1968) 67 ITR 584 (Mad), CIT vs. S.N.A.S.A. Annamalai Chettiar (1973) CTR (SC) 233 : (1972) 86 ITR 607 (SC), Hindustan Trading Corpn. vs. CIT (1986) 57 CTR (Guj) 114 : (1986) 160 ITR 15 (Guj), Godhra Electricity Co. Ltd. vs. CIT (1997) 139 CTR (SC) 564 : (1997) 225 ITR 746 (SC) and ITO vs. Gokaldas Pragji (1987) 29 TTJ (Ahd) 368 : (1988) 24 ITD 25 (Ahd). According to learned counsel for assessee, no commercial profits had accrued or arisen to assessee on account of export transaction because entire amount outstanding is irrecoverable. assessee had reached to this conclusion on basis of information received from Sherief of Greater London, that M/s Freeway Suppliers Ltd., Dubai had no assets. Regarding year of loss, it was submitted that it should be allowable in asst. yr. 2001-02, when exports were made. On question that whether writing off of such loss is necessary for claim, it was submitted that as per judicial pronouncements, for claiming trading loss, it is not necessary to write off loss in books. 15. Against this, learned Departmental Representative submitted that definition of debt is clear under ss. 36(2)/36(1)(vii) of Act. When statute is clear, literal meaning to statute should be followed. assessee has sold goods, which was received by Dubai party. It is no longer stock-in-trade. assessee has only to recover debt from Dubai party. Therefore, it cannot be trading loss. At best it could be debt not recoverable. Since assessee has not written off same in books of account in assessment year in question, same cannot be called even bad debt. learned Departmental Representative submitted that assessee has artificially created distinction between financial debt and trading debt, though no such distinction existed in statute. learned Departmental Representative relied on decision of Hon ble Supreme Court in case of Britannia Industries Ltd. vs. CIT (2005) 198 CTR (SC) 313 : (2005) 278 ITR 546 (SC) for proposition that literal meaning of words of statute should be given. 16. We have considered rival submissions and material on record. We have also given our sincere consideration to decisions cited by parties. assessee has claimed amount not recoverable from Dubai party as trading loss on ground that loss has occurred during course of business. No doubt, trading loss has wider connotation than bad debt. bad debt is also trading loss but all trading loss need not necessarily be bad debt. There can be debt which may not fall within purview of s. 36(1)(vii) r/w s. 36(2) and would be eligible for deduction in computation of net profit chargeable to tax. For example, loss pertaining to stock-in-trade, money advanced in course of business of financing, or money-lending, but irrecoverable, would constitute trading loss. Loss of stock-in-trade either under storage or during transit after purchase or prior to sale would normally be covered as trading loss. But where goods are sold, title of goods is passed on to purchaser under Sale of Goods Act and purchaser become owner of goods, then what purchaser is required to pay back is money equal to sale consideration. This will be trading debt. To cover such contingency, s. 36(1)(vii)/36(2) have been introduced in Act, which are specific provisions. They deal with allowability of debt against income if such debts have been taken into account while computing income of assessee i n current year or in earlier years. claim of assessee that loss should be allowed under s. 28 is not acceptable. Where amount is covered by any specific provision like s. 36(1)(vii) r/w s. 36(2), it could not be considered as loss in general provision under s. 28. principle is expressed in maxims generalia specialibus non derogant and generalia specialia derogant. If special provision is made on certain matter that matter is excluded from general provision. These maxims come to help when issue is covered by two apparently conflicting provisions. After finding out as to which provision is more specific as compared to other, and which specific area is carved out from general area one needs to apply specific provision to specific area. In present case general allowability of loss is covered by s. 28 but loss on account of bad debt is covered by s. 36(1)(vii) r/w s. 36(2). Prior to completion of sale case is covered by s. 28 but after completion of sale and creation of debt, case is covered by s. 36(1)(vii) r/w s. 36(2). Therefore, we are unable to accept contention of assessee that non-recoverable sale proceeds should be allowed as trading loss. According to us, it is debt, which would be allowed as and when conditions laid down in s. 36(1)(vii) r/w s. 36(2) are satisfied. 17. Now let us consider some of case laws referred to by parties. "(16.1) In Motamal Jethumal vs. CIT (1947) 15 ITR 155 (Pat), question involved was whether loss due to accidental fire of part of stock-in-trade of assessee, who is dealer in grain, jute, groceries and cloth, is allowable as business loss under s. 10 of IT Act, 1922. Hon ble Patna High Court referred to views of House of Lords in Green vs. Glikstern & Sons Ltd., wherein loss of stock-in-trade in fire and non-recovery of money from insurance on part of such loss was considered equivalent to non-recovery from customer to whom timber was sold. Since provisions of s. 37(1)(vii) r/w s. 36(2) are new insertion in IT Act, 1961, there were no equivalent provisions in section 10(2) of IT Act, 1922. Originally, it was introduced by amendment Act, 1939 as cl. (xi). It could not be said that equivalent provision for bad debts were available before House of Lords in case of Green vs. Glikstern & Sons Ltd. (supra). After having specific provisions in 1922 Act and then in 1961 Act, section 36(1 )(vii) r/w s. 36(2), observations of House of Lords in Green vs. Glikstern & Sons Ltd. (supra) are no longer relevant. decision of Hon ble Patna High Court in Motamal Jethumal (supra) case are, therefore, not applicable to facts of present case. (16.2) decision in Pohoomal Bros. vs. CIT (1958) 34 ITR 64 (Bom) is also not applicable for similar reasons. There was destruction of stock-in- trade due to enemy fire. It was treated as business loss. There is no dispute with this proposition but it is not case where trading dues not recovered has been allowed as trading loss ignoring provisions in statute, with regard to bad and doubtful debts. (16.3) In Annamalai Chettiar vs. CIT (1968) 67 ITR (Mad) 584 : 67 ITR 584 (Mad), question was of allowability of debt incurred in course of money- lending business. Such non-recovery of debts in ordinary course of money- lending business was treated as business loss. In present case, assessee is admittedly not doing business of money-lending and hence non- recovery of trade debt cannot be allowed as trading loss. (16.4) In Hindustan Trading Corpn. vs. CIT (1986) 57 CTR (Guj) 114 : (1986) 160 ITR 15 (Guj) question involved was whether excess or additional amount realised by assessee on devaluation of rupee, on sale of exports would be revenue receipt. It was held that such excess amount so realised would be revenue receipt in year of receipt. facts of case are, therefore, distinguishable. (16.5) In Godhra Electricity Co. Ltd. vs. CIT (1997) 139 CTR (SC) 564 : 225 ITR 746 (SC), that assessee company had unilaterally enhanced rates of electricity, which was disputed by consumers. enhanced rates could not be recovered and assessee company was taken over by Government. On these facts, it was held that amount due to enhanced rates had not accrued to company. In present case, there is no unilateral enhancement of rates of goods sold to Dubai party. It was as per mutual agreement that sale of goods are complete. What is not recovered is trade debt, which if not recoverable is recovered by specific provisions in s. 36(1)(vii) read with s. 36(2) and is allowable if conditions laid down therein are satisfied." In ITO vs. Gokaldas Pragji (supra), trade debt was allowed under s. 36(1)(vii)/37(2). Tribunal confirmed order of CIT(A) but also held that it is allowable as trading loss also under s. 28(1). In present case, loss is neither claimed as bad debt nor so allowed. Thus, trade loss which also satisfied condition under s. 36(1)(vi) r/w s. 36(2) can be allowed either way but not in case where conditions laid down under s. 36(1)(vii) r/w s. 36(2) are not satisfied. 18. Another proposition of learned counsel for assessee is that, it is not essential to write off trading loss. Since, we have already held above that amount irrecoverable is debt and can be allowed as bad debt not as trading loss, question of writing off such trading loss in books of account for its allowability is no longer relevant. 19. last proposition raised by learned counsel for assessee is that as income would accrue even though not credited in books of account, loss would also accrue even though not debited in books of account. There is no dispute with this proposition. This would be applicable if amount not recovered during year is treated as trading loss. We have already held that it is only debt, which is yet to be written off in books. In view of this, we reject contention of assessee and confirm order of CIT(A) on this ground. Deduction under s. 80HHC on interest of Rs. 4,73,02,238 2 0 . next ground is that deduction under s. 80HHC has not been allowed on interest amount of Rs. 4,73,02,238 credited by assessee against M/s Freeway Suppliers, Dubai on outstanding debt. AO disallowed claim of deduction on ground that it is not profit derived from export of goods or merchandise. This income is on account of charge on debt and not on account of sale proceeds of goods. According to AO, transaction in export comes to end for purposes of deduction under s. 80HHC, moment sale is completed and either sale proceeds are realised or debt is created towards unrealised export proceeds. AO disallowed claim by observing as under : "Interest Income ; assessee has charged interest amount of Rs. 4,73,02,238 being charged to export debtor same is not eligible for deduction under s. 80HHC, this amount is income on outstanding debt and is not derived from export activity of assessee. deduction under s. 80HHC is eligible for profit derived from export of goods or merchandise . This income is on account of charge on debt and not on account of sale proceeds of goods. export cycle stops per se for purpose of deduction under s. 80HHC once debt is created and after that any receipt arising is not eligible for deduction under s. 80HHC and also cannot be treated at par with exchange gain, as debt remains same but because of fluctuation in international currency in rupee terms it changes but as per invoice value debt remains same. assessee was asked in view of above vide order sheet dt. 19th Aug., 2003 that why interest charged on outstanding of exports should be allowed as deduction under s. 80HHC. assessee replied vide letter dt. 19th Aug., 2003 as under : company had under erroneous belief that it was entitled to receive interest on amount outstanding from party M/s Freeway Suppliers Limited, had wrongly booked income of Rs. 4,73,02,238 as interest. Company h s recently been legally advised that its claim for interest nor had income legally accrued to it, its taking credit for interest amount was not in order. Accordingly, Company is not liable for tax on Interest Income of Rs. 4,73,02,238 and it should be reduced from total income. assessee s submissions are considered as under : company has filed its return of income on scheduled time and time for filing revised return has also lapsed. assessee has claimed that it was erroneous belief, if that would have been case, same would not h v e been either approved by auditors/or Directors of Company. assessee has filed its claim and has formed part of its accounts, now as deduction under s. 80HHC is not being allowed and as assessee has not realised its export proceeds, just to reduce its liability company wants to withdraw its income. assessee has option to write off in coming year if same is not realised and these are not fictitious but are arrived methodically on outstanding, so claim of assessee regarding withdrawal is non bona fide and out of time and with intention to reduce tax liability. Further, Company has booked Rs. 88,33,956 as exchange gain during year. By applying principles of real income, notional income, i.e., estimated profits on foreign exchange transactions which was represented by book entries is not liable to tax as same does not represent real/Commercial income (relying on Indian Overseas Bank vs. CIT (2001) 250 ITR 146 (Mad). amount of Rs. 88,33,956 should not be liable for tax. assessee s submissions are considered as under : principle of accounting provides for accounting of foreign exchange receivable/payable as on 31st March of relevant year as per market value. same has been recognized by assessee accordingly but now as export proceeds have not been received by assessee and same is treated as local turnover so exchange gain is also bound to, get taxed, therefore, assessee has withdrawn its claim. assessee s claim is rejected as being non bona fide." 21. AO thereafter excluded said amount from eligible profit for deduction under s. 80HHC, but taxed as income from other sources. 22. learned Authorised Representative submitted before CIT(A) that no interest income is deemed to have accrued in absence of any agreement or contract between concerned parties for levy of such interest. As entire sale proceeds are irrecoverable, question of taxing interest thereon should not arise. CIT(A) considered submissions and dealt with this issue as under : "3.3 I have carefully considered facts of case. It is undisputed fact that AO has not made any addition on account of interest on outstanding export receipts or exchange fluctuation gain. On contrary, it is appellant company itself who has credited such incomes in its books of account and shown as income in return of income filed. Under these circumstances, nothing wrong can be found in action of AO to consider such receipts of for tax. If argument of learned Authorised Representative regarding no real income accruing to appellant company on account of interest and exchange fluctuation in face of irrecoverability of export sale proceeds, is to be taken for consideration, then, there is no explanation for act of appellant company itself in crediting such receipts in books of account. appellant has not led any evidence in support of generalised stand taken in letter dt. 19th Aug., 2003 filed during assessment proceedings regarding company being under erroneous belief that it was entitle to receive interest on outstanding amount from M/s Freeway Suppliers Ltd. Moreover, appellant did not file any revised return within time permissible under s. 139(5) of IT Act, 1961. Under these circumstances, I do not find anything wrong in action of AO to turn down appellant s request for reducing its returned income by amount of Rs. 4,73,02,238 on account of accrued interest and Rs. 88,33,956 on account of exchange fluctuation gain. This ground of appeal is, therefore, dismissed." 23. Before us, learned Authorised Representative submitted that no enforceable right has accrued to assessee for charging interest under head "Other " sources". He relied on decision of Hon ble Allahabad High Court in National Handloom Development Corpn. Ltd. vs. Dy. CIT (2004) 188 CTR (All) 195 : (2004) 266 ITR 647 (All) and also of Hon ble Delhi High Court in case of CIT vs. Modi Rubber Ltd. (1998) 148 CTR (Del) 448 : (1998) 230 ITR 817 (Del). 24. On other hand, learned Departmental Representative relied on orders of authorities below. 25. We are of view that authorities below have not been able to show that there existed agreement between assessee and Dubai party that on its failure to make payment of sale proceeds, assessee would be entitled to charge interest. Therefore, unilateral action of assessee in crediting interest against its dues from Dubai party would not entitle assessee to receive interest. In any case, we consider it proper that relevant agreement be examined by AO and if there is no provision for accrual of interest of delayed payment of sale proceeds, same shall not be charged to tax. But where agreement existed whereby Dubai party would be liable to pay interest on delayed payment of sale proceeds, then, interest income would accrue to assessee by operation of agreement. action of assessee in crediting same in books of account would further confirm such accrual and therefore, same would be chargeable to tax. Accordingly, we restore this issue back to file of AO with above observations. Exclusion of Rs. 88,33,956 on account of foreign exchange fluctuation 26. last issue is about exclusion from total income of sum of Rs. 88,33,956 being amount of gains arising out of foreign exchange fluctuation credited by assessee on outstanding export proceeds due from Freeway Suppliers, Dubai. assessee submitted before CIT(A) that notional income being estimated profits on foreign exchange fluctuation represented by book entries is not liable to tax, as same does not represent real or commercial income. assessee relied on decision of Indian Overseas Bank vs. CIT (2001) 250 ITR 146 (Mad). Whereas learned Departmental Representative relied on ONGC Ltd. vs. Dy. CIT (2002) 77 TTJ (Del)(SB) 387 : (2003) 261 ITR (AT) l (Del)(SB) and exclusion of sum of Rs. 88,33,956 from computation of income was claimed on ground that it is only estimated profit. Since accounts with Dubai party were not settled, profit so estimated on account of fluctuation of foreign exchange rate is only notional. Therefore, addition to sale proceeds, receivable on account of foreign exchange fluctuation, is bound to be taxed. Before CIT(A), assessee has raised same plea that it should be taxed on real and not on notional income. foreign exchange fluctuation is only notional income and it should not be taxed. CIT(A) dismissed this ground of assessee by holding that outstanding export receipt on account of ex change fluctuation is taxable. 27. Before us, learned Authorised Representative relied on real income theory. He submitted as under: "1. Whether any commercial profit or real profit has arisen/accrued on account of export of goods by appellant a. Badridas Daga vs. CIT (1958) 34 ITR 10 (SC) (refer to pp. 142 to 153 of PB) While section 10(1) of Indian IT Act, 1922, imposes charge on profits or gains of business, it does not provide how these profits are to be computed. Sec. 10(2) enumerates various items which are admissible as deductions but they are not exhaustive of all allowances which could be made in ascertaining profits of business taxable under s. 10(1). Profits and gains which are liable to be taxed under s. 10(1) are what are understood to be such under ordinary commercial principles. When claim is made for deduction for which there is no specific provision under s. 10(2), whether it is admissible or not will depend on whether, having regard to accepted commercial practice and trading principles, it can be said to arise out of carrying on of business and be incidental to it. loss for which deduction is claimed must be one that springs directly from carrying on of business and is incidental to it, and not any loss sustained by assessee even if it has some connection with his business. If that is established, then deduction must be allowed, provided that there is no provision against it, express of implied, in Act. b. It is necessary to bear in mind that thing to be taxed is amount of profits or gains of trade or business and that word profit should be understood in its natural and proper sense in sense which no commercial man would misunderstand: per Lord Chancellor Halsbury in Gresham Life Assurance Society vs. Styles approved by Privy Council in Pondicherry Railway Co. Ltd. vs. CIT, Madras. c. Lord President Clyde in Whimster & Co. vs. IRC stated at page 823 : In computing balance of profits and gains for purposes of IT, or for purposes of Excess Profits Duty, two general and fundamental commonplaces have always to be kept in mind. In first place, profits of any particular year or accounting period must be taken to consist of difference between receipts from trade or business during such year or accounting period and expenditure laid out to earn those receipts. In second place, account of profit and loss to be made up for purpose of ascertaining that difference must be framed consistently with ordinary principles of commercial accounting, so far as applicable, and in conformity with rules of IT Act, or of that Act as modified by provisions and schedules of Acts regulating Excess Profits Duty, as case may be. For example, ordinary principles of commercial accounting require that in P&L a/c of merchant s or manufacturer s business values of stock-in-trade at beginning and at end of period covered by account should be entered at cost or market price, whichever is lower; although there is nothing about this in taxing statutes. d. Lord Herschell observed in Russell vs. Aberdeen Town and County Bank that profit of trade or business is that surplus by which receipts from trade or business exceed expenditure necessary for purpose of earning those receipts.... Unless and until you have ascertained that there is such balance, nothing exists to which name profits can properly be applied. e. In Usher s Wiltshire Brewery Ltd. vs. Bruce Lord Parker observed that: where deduction is proper and necessary to be made in order to ascertain balance of profits and gains, it ought to be allowed provided there is no prohibition against such allowance. " (Emphasis, italicised in print) 28. Against this, learned Departmental Representative submitted that sale proceeds recoverable is trading item. Any gain on account of foreign exchange fluctuation will also be trading receipt. Therefore, it would be taxable. He relied on CIT vs. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. (1999) 152 CTR (Bom) 284 : (1999) 237 ITR 253 (Bom) and CIT vs. V.S. Dempo & Co. (P) Ltd. (1993) 115 CTR (Bom) 163 : (1994) 206 ITR 291 (Bom) for proposition that extra amount payable due devaluation of rupee is allowable as business loss. Then similarly extra amount received/receivable on account of foreign exchange fluctuation should be taxed as revenue receipt. 29. We have heard rival submissions and considered material on record. undisputed facts are that assessee has credited its accounts by foreign exchange fluctuation. question is whether it is real income and is liable to tax or not. During end of accounting year, when assessee credited this sum, amount recoverable from Dubai party was not considered s bad debt and was not written off. It was considered recoverable. Undisputedly, this debt is arising on account of trade. Therefore any addition or reduction in money receivable or payable on account of fluctuation would be on revenue account. decision of Hon ble Madras High Court in Indian Overseas Bank (supra) was based on their decision in Indian Overseas Bank vs. CIT (1990) 82 CTR (Mad) 81 : (1990) 183 ITR 200 (Mad). In earlier decision in Indian Overseas Bank (supra), it was held that profit or loss in forward transactions in foreign exchange can only be ascertained after settlement of forward contracts and not before. In that case IOB had estimated profit before settlement of forward contract in foreign exchange. It was held that no income is accrued before settlement. Hon ble Madras High Court observed as under : "The levy of income-tax is on income and though IT Act has taken note of twin points of time at which liability to tax is attracted, viz., accrual of income or its receipt, yet, substance of matter is income and if income does not result at all, there cannot be tax, even though, for purposes of book keeping, entry is made about hypothetical income which does not materialise and mere book keeping entry cannot be income unless income has actually resulted. question whether there is loss or profit on foreign exchange transactions can be ascertained only after settlement of forward contracts and not before and so long as that stage has not been reached, loss can only be notional and not actual or real and notional loss cannot be claimed as deduction. Whether loss or profit, principle applicable would be same and estimated profit, till settlement of forward foreign exchange contracts, could be regarded only as notional and not actual or real and such notional profits cannot be assessed. assessee was nationalised bank and one of main items of its business was to deal in foreign currencies on behalf of its constituents. During assessment years in question, forward exchange contracts entered into b y assessee remained unsettled and as contracts entered into by assessee related to different foreign currencies, assessee estimated profits recoverable on these outstanding contracts on basis of rates of exchange as at end of accounting period in respect of two asst. yrs. 1972-73 and 1973-74. assessee contended that estimated profits were not assessable in its hands. ITO rejected this contention and Tribunal also held that estimated profits were assessable. On reference : Held, that amounts in question were only estimated anticipated income arrived at on basis of rates of exchange which prevailed, presumably on last day of accounting year, without actual settlement of forward contracts in foreign currencies having been brought about and, in that sense, amounts in question represented merely notional profits and could not be subjected to tax." 30. However, in present case in hand, assessee is not dealing in forward transaction in foreign exchange and there is no question of any settlement of any contract. sale of goods to Dubai Party is complete. What is due to assessee is ascertained sum being sale proceeds of goods, whose final value in Indian rupees will depend upon exchange rate at end of accounting period. 3 1 . In ONGC Ltd. (supra), it was held that loss on account of foreign exchange fluctuation is allowable on loan due to assessee, if it is following mercantile system of accounting. Hon ble Tribunal observed as under : "The assessee, i.e., ONGC, which is wholly owned Government of India Undertaking, established under ONGC Act, 1959, for exploration, exploitation and extraction of mineral oils, had filed its return for asst. yr. 1991-92 declaring total income of Rs. 4,39,49,86,580 against which AO completed assessment on total income of Rs. 8, 12 ,3,7,78,325 by making various disallowances and additions. AO disallowed, inter alia, claim of loss of Rs. 5,78,25,83,451 on accrual basis on revenue account on account of" fluctuation of foreign exchange rate. He did so by following assessment order for earlier year, wherein it was held that such loss was notional loss. This was upheld by CIT(A). On further appeal : Held that in order to find out if expenditure is deductible following have to be taken into account (i) whether system of accounting followed by assessee is mercantile system, which brings into debit expenditure amount for which legal liability has been incurred before it is actually disbursed and brings into credit what is due, immediately it becomes due and before it is actually received; (ii) whether same system is followed by assessee from very beginning and if there was change in system, whether change was bona fide; (iii) whether assessee has given same treatment to losses claimed to have accrued and to gains that may accrue to it; (iv) whether assessee has been consistent and definite in making entries in account books in respect of losses and gains; (v) whether method adopted by assessee for making entries in books both in respect of losses and gains is as per nationally accepted accounting standards; (vi) whether system adopted by assessee is fair and reasonable or is adopted only with view to reducing incidence of taxation. method of accounting adopted by assessee right from asst. yr. 1982-83 was mercantile system and it had been consistently claiming losses suffered by it on account of fluctuation in foreign currency rates only on accrual basis. In fact, in asst. yrs. 1982-83 to 1986-87 claim of assessee was allowed by AO. Up to asst. yr. 1981 -82 loss was claimed in year in which loans or part thereof were repaid. Thus, assessee had changed its method of accounting from asst. yr. 1982-83 but bona fides of change were not doubted or disputed by Department. Further, assessee had been consistent and definite in making entries in its account books in respect of losses suffered on account of fluctuation in foreign currency rates. By adopting same accounting principles that were adopted in year under consideration, assessee had shown gain of Rs. 293.37 crores during asst. yr. 1997-98 because Indian rupee appreciated as compared to foreign currency. assessee offered this amount for taxation and Department also had taxed same. Department could not be permitted to deny claim in one year and in another year when there was profit, tax same as same was against principles of natural justice and also against principles of accounting. Accounting Standard-11 (AS-11) on "accounting for effects of changes in foreign exchange rates" issued by Institute of Chartered Accountants of India, which came into effect in respect of accounting periods commencing on or after 1st April, 1987, provides that if result of conversion at closing rate is net loss, long-term liabilities should be restated and loss should be charged in profit and loss account. However, deferral of liability over remaining term of liability is not permitted if such losses are likely to recur. Thus, claim made by assessee was according to accepted accounting standards. ONGC was wholly owned Government of India undertaking. Admittedly, its accounts were prepared in accordance with provisions of Companies Act, 1956. They were duly audited by Comptroller and Auditor-General of India and further approved and endorsed by Parliament. In case of assessee "event", i.e., change in value of foreign currency in relation to Indian currency had already taken place in current year. Therefore, loss incurred by assessee was fait accompli and not notional one. assessee s claim of loss on account of fluctuation in foreign currency rates was allowable." 3 2 . In CIT vs. V.S. Dempo & Co. (P) Ltd. (supra) followed in CIT vs. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. (supra), assessee had to pay extra amount on its purchase, due to devaluation of rupee. extra amount so payable was held allowable as trading loss. Conversely, if extra amount is recoverable on sale proceeds due to upward valuation of rupee due to foreign exchange fluctuation should be taxable as trading receipt. Thus, where loss is allowable on fluctuation of foreign exchange in mercantile system of accounting, increase in sale proceeds (debts) due to fluctuation of currency rates is taxable as trading profit. assessee is undoubtedly following mercantile system of accounting. It has credited, at end of accounting year, what is due to him on account of sale proceeds. What treatment one has to give to increased liability arising due to fluctuation, same treatment has to be given to increased gain arising due to fluctuation. If exchange in liability due to fluctuation is only capital account then such increased liability cannot affect P&L a/c. But where change in liability is on revenue account, then it will certainly affect P&L a/c. In present case, it is not disputed that change is in revenue account. But according to learned counsel for assessee, it is not real income hence should not be taxed. We are unable to agree. Specific provision is made in statute in s. 36(1)(vii) r/w s. 36(2). Where debt become bad, it can be written off and is allowable against profit of business in year when it is written off. debt, which has not become bad cannot be set off against profit of business on ground that it is not real income ignoring specific provision made in statute in this regard. If trade debts not considered recoverable and allowed to be set off on ground that they do not represent real income then provisions of s. 36(1)(vii) r/w s. 36(2) will become redundant so far as allowability of bad debts are concerned. theory of real income is applicable when there is no specific provision in statute to deal with issue. When concept of real income comes directly in conflict with provisions of Act, then provisions of IT Act, 1961 will prevail. arguments of learned counsel for assessee that as when recoveries are made out of such unreal income , they will be offered for taxation, is of no consequence. Thus, increase in trading receipts on account of foreign exchange fluctuation is taxable as income. Where, it is finally not recoverable and written off, provisions of s. 36(1)(vii) r/w s. 36(2) are attracted. Thus, we do not find any fault in order of authorities below in respect of this ground. Therefore, we reject this ground of assessee. 33. As result, appeal of assessee is allowed in part as indicated above. Asst. yr. 2000-01 34. In asst. yr. 2000-01, assessee raised following grounds : learned CIT(A) erred in determining deduction under s. 80HHC at Rs. 2,63,79,183 as against claim of appellant of Rs. 12 ,61,95,974 and while doing so he among others erred in (a) holding that indirect cost not related to trading export of Rs. 18,16,18,323 was to be proportionately allocated in ratio of export turnover to total turnover. (b) Not appreciating that appellant was granted extension by competent authority for unrealised export proceeds. 35. main grievance of assessee is that as against claim of Rs. 12 ,61,95,974, CIT(A) has determined deduction under s. 80HHC at Rs. 2,63,79,183 by allocating indirect cost proportionately in ratio of export turnover to total turnover. AO noted that total indirect cost of Rs. 18,15,18,323 was not considered well working out export profit. Total indirect cost allocated is as under : Sl Amount (in Particulars No. Rs.) Rs. 1. Freight & handling charges 7,27,11,139 2. Insurance Rs. 50,55,943 Rs. 3. Misc. expenses 3,24,11,290 4. Travelling & conveyance Rs. 52,69,403 Rs. 5. Advertisement & publicity 5,56,61,085 6. Director s fees Rs. 64,000 7. Auditor s remuneration Rs. 4,40,520 Deferred revenue exp. Rs. 8. Written off 1,00,04,972 Rs. Total Total 18,15,18,323 3 6 . AO further noted that total turnover of business is Rs. 1,52,89,50,156, whereas value of export trade is Rs. 56,86,75,431. Thus, export turnover is only 37.2 per cent of total turnover. Accordingly, he allocated indirect cost of Rs. 6,75,62,016 being 37.2 per cent of total turnover and worked out allowable deduction as under : Export turnover of Rs. trading goods 56,86,75,431 Rs. Less : (i) direct cost 44,04,44,628 Rs. (ii) indirect cost 20,34,829 Rs. (iii) not considered 6,75,62,016 Rs. by assessee 51,00,41,473 Rs. allowable deduction 5,86,33,958 Rs. 12 claimed by assessee ,61,95,974 3 7 . When asked to explain, assessee explained to AO that no indirect cost has been incurred for export; entire indirect expenses pertained to manufacturing of paints and allied products and generation of electricity. Further, export activities were carried out only for seven months. Therefore, if at all, indirect expenses are to be allocated, then proportionate expenses for seven months alone should be allocated to export trade. In addition, it was submitted that freight and handling charges of Rs. 7,27,11,139 pertained to local sales and purchase of goods only. said cost is directly related to purchase and sale of goods cannot be allocated to export trade. AO rejected claim on ground that there is no specific provision in s. 80HHC for restricting indirect expenses only to extent of period during which export activity was carried out in relevant year. According to AO, assessee would have incurred indict expenses even during remaining months of previous year for obtaining export orders. AO also invoked definition of indirect cost as provided in Expln. E to s. 80HHC(3). Thus, AO computed allowable deduction at Rs. 5,86,33,958 as referred above. Before CIT(A) no submissions were made and accordingly, CIT(A) confirmed decision of AO by observing that out of total turnover of Rs. 56,86,75,431, assessee was able to bring foreign exchange to extent of Rs. 26,62,88,106. 38. We have heard rival submissions and considered facts and material on record. We are of view that authorities below have not examined nexus of indirect cost with export. Each and every item of expenditure, out of total indirect cost, needed to examined as to whether any of these items would have been incurred for purpose of export. For this purpose, issue is restored to file of AO. So far as proportionate allocation of indirect cost to export trade is concerned, we find to be in order because it is in accordance with Expln. e to s. 80HHC(3),which reads as under : "(e) indirect costs means costs, not being direct costs, allocated in ratio of export turnover in respect of trading goods to total turnover;" 39. Wherever indirect costs are common, proportionate distribution is to be made. But if some indirect cost is exclusively incurred for manufacturing activities, such indirect cost should not be taken into consideration for purpose of proportionate allocation. 40. Regarding action of AO in not distributing indirect expenses on basis of period for which export was made, we are of view that such action is against principles of natural justice. If assessee had made export for seven months, then indirect expenses of entire year cannot be allocated to export trade. Therefore, allocation of indirect expenses to export trade should be restricted to period for which export was made. In case, there was only temporary lull in export trade and assessee has again started export activities after gap of few months, then there is no need to restrict such allocation period-wise. In other words, temporary lull in export activities would not result in savings in indirect expenses relating to export trade. 41. Another issue, which requires to be considered is whether deduction under s. 80HHC has to be restricted on basis of foreign exchange brought into India, we are of view that AO and hence CIT(A) are justified in restricting claim of deduction under s. 80HHC on basis of foreign exchange brought into India. It has been held in D.B. Exports India vs. CIT (supra) that where export proceeds are not brought into India even after repeated extension of time, deduction under s. 80HHC would not be admissible. In view of this, we confirm action of AO and CIT(A). As result, issue is set aside to file of AO for deciding issue in light of observations made by us. 4 2 . In result, appeal of assessee is allowed for statistical purpose only as indicated above. *** SNOWCEM INDIA LTD. v. DEPUTY COMMISSIONER OF INCOME TAX